Feb 22, 2012
The Advisor’s
Option Episode Two: Playing Defense with Protective
Puts
Options 101: Continuing Education:
- Graduating from the long call to the protective put
- The many uses of protective puts
- Speculative - using leverage to place a bearish bet
- Defensive - a “married put” can limit risk against the downside while maintaining the benefits of a long stock position
- The benefits of protective puts - maintain voting rights, collect dividends, maintain upside potential, limit tax liability
- No free lunch - puts can be expensive
- Finding the sweet spot between buying too much insurance and paying too much time decay
- Put options vs. stop-loss order - which is preferable?
Tricks of the Trade:
- How to introduce the idea of portfolio protection to your clients
- Options are appropriate for every level of risk tolerance
- How to take the emotion out of the advisor/client relationship using options
- Practical tips for implementing puts into your practice